In the past five years, two governments have passed unique legislation directly related to the private sector’s ethical role in business. The Indian government believes that social responsibility should motivate corporations to be socially, economically and environmentally ethical through financial contributions that foster national development. The 2013 Corporate Social Responsibility (CSR) Mandate requires companies above a particular size (revenues more than 10 million rupees) to allocate 2% of their historical net profits to the philanthropic sector.
The UK government believes that combatting human trafficking should motivate corporations to be ethical through transparent supply chains. The 2015 Modern Slavery Act requires companies over a certain size (total annual turnover over £36M) to publish a compliance statement every financial year to ensure that no slavery or human trafficking has taken place in their supply chains. These statements must be signed by a company director, approved by the Board and published on the company website.
What is the private sector response to the CSR Mandate and the Modern Slavery Act?
In both countries, approximately one third of targeted corporations comply with national legislation. Both countries are now undertaking legal reviews and measures to raise legislative compliance. However, if the quantity of compliance is low, unfortunately the quality of compliance is even lower. Although these are two different types of human rights issues, the actor organisations are the same ergo the problem of sustainability is the same.
- According to ipleaders, Indian companies that have enormous fiscal resources lack adequate knowledge of existing public problems and policy measures. As a result, their CSR efforts are misguided and do not help the public with sustainable benefits.
- The report “Agriculture and Modern Slavery Act Reporting: Poor Performance Despite High Risks” confirmed that the quality of UK statements was low and companies showed a “tick-box approach” and provided “only generic comments about zero tolerance to modern slavery with no indication of actions taken to address the issue.” In this sector, the report also found 40% of companies did not describe any form of risk appraisal or identify any areas of high risk, and nearly 80% of statements failed to include anything on the effectiveness of their steps to address slavery.
The Missing Principals
India uses the United Nations Sustainable Development Goals as its guiding principles on national development. The UK recently developed and published a set of four principles to prevent forced labor. What will the impact of these principles be? For me, it all boils down to the relationship between principles and principals. A principal is a person in leadership who acts on principles, which are standards, rules, or guiding beliefs.
In overall terms, we can posit that the private sector has not yet integrated human rights into their business strategies and goals. Disclosure of compliance does not imply that social change and awareness is included in corporate values. According to an article in The Harvard Business Review, the private sector must take the first step: Corporations must develop measures of the social value produced by a new business model and of the financial results, and must demonstrate how the two are connected. The role of governments is to ensure that compliance is measured by those agreed-upon demonstrations. Ethical business practices must create sustainable brands that are profitable. Effective business process re-engineering investments with clearly agreed upon SMART goals must go hand-in-hand with human rights compliance. Sustainable Rescue is currently developing and testing a measurement performance model.